As your startup grows, you might find yourself wondering if it's time to bring in a Chief Operating Officer (COO) or President. This decision is a big one, and it can significantly impact your company's growth trajectory, but how do you know when the time is right?
To understand more about this transition, I spoke with Katie Bullard, President of Red Canary, an executive who has served as President, alongside a founder CEO, for multiple high-growth companies. Katie is a software leader, investor, board member, and Stage 2 Capital Limited Partner, and has led multiple businesses through the scale-up journey from $20M to $300M. (Fun fact, she’s also been recognized as one of the Top 50 Most Powerful Women in Technology by the National Diversity Council!) With a background like that, I knew she'd be the perfect person to share advice on this topic.
Recognizing the Need for a Chief Operating Officer and Self Reflection
One of the first steps in this process, according to Katie, is self-reflection. She advises CEOs to ask themselves: "What's falling through the cracks at this scale? Where am I spending too much time in areas that don't energize me or where I don't provide significant value?"
Katie emphasizes the importance of being proactive with this decision: "When the CEO does that exercise, or the founder (versus the board), you always end up in a better place."
As a Stage 2 Partner, I have experienced this from the board side. If the CEO is not able to self-reflect and proactively guide the board on the next executive hires, they often find themselves with fewer options when the pressure mounts.
While there's no one-size-fits-all milestone, Katie notes that certain events often trigger the consideration of a COO:
- CEO feeling stretched too thin across multiple areas of the business - This could happen at $10 million, $50 million, or even $250 million in revenue - it's different for everyone and every company.
- Geographic expansion - Maybe your company has always been based in one location, but now your presence in another area has grown so much that you need a co-head there to manage the day-to-day operations.
- Approaching $100 million in ARR - This is often a turning point for companies. The business has a need to scale and things tend to become more challenging across all functions. At this point, the day to day role of the CEO often has to change.
Defining the Role: COO vs President vs CEO
When it comes to titles and responsibilities, Katie stresses flexibility. "COO is defined differently at every single company. There is no standard definition," she says. In fact, many people use the terms COO and President interchangeably, further blurring the lines between these roles. However, Katie did share three common archetypes of CEOs and why it might be time for a COO (she also notes there are many such scenarios, but these are common ones that might hit home for some founders).
- The Visionary - The externally-focused CEO who needs an operational partner to run the day-to-day business. This founder finds their energy from being on stage, in front of customers, which means they may not have the energy, focus, and time to invest in daily operations.
- The Tech Founder - The technical founder who has a rich technical background but requires go-to-market expertise to build out the customer-facing GTM functions like demand generation, marketing, customer success and sales.
- The Growth Leader - The CEO who simply needs more bandwidth to manage a growing organization. This founder may be well-equipped to manage the operations of the business but has reached a stage of growth where the processes just don’t scale, and there aren’t enough hours in the day to keep the company growing.
"In each case, the goal is to create a partnership that complements the CEO's skills and allows the business to scale effectively," notes Katie.
Things to Consider When Hiring a Chief Operating Officer
Like any key role for your company, before you post that job or hire that executive recruiter, you need to be crystal clear on what you’re looking for. I have seen this go wrong before and it can be a costly mistake. We have written on this topic in the past and outlined a playbook for hiring your first sales leader. The COO role is essentially the right hand person to the CEO so taking the time to think it through will pay dividends in the long run.
Before bringing in a COO to the organization, Katie emphasizes two critical steps. You must:
- Redefine the CEO's role - This involves carefully thinking about and restructuring the CEO's responsibilities. It's not just about adding a new position, but actively deciding how the CEO spends their time and energy.
- Consider the impact on the executive team - You must think through how this new role will affect other executives' responsibilities, reporting lines, decision-making, operating cadence and overall team culture.
What does Katie mean by redefining the CEO’s role?
When you decide to bring on a COO, you must recognize that the CEO's role will also change. Being proactive about what this change will look like is the first step to setting yourself up for success. But what does that look like in practice?
Katie shared some tactical examples “It often involves a whiteboarding session where the CEO, the new COO, and a few other executive team members sit down together. The CEO identifies four or five key areas where they'll focus their time and energy, as well as areas where they'll step back from day-to-day involvement.”
This exercise isn't just theoretical—it directly impacts how the CEO spends their time. For instance Katie expands, “If bringing on a go-to-market focused COO, the CEO might stop attending weekly forecast calls or driving the development of the bookings model. Instead, they'll delegate these tasks to the new COO, reviewing and approving the final results.
In some cases, particularly when delineating between external and internal focus, the CEO might even step out of certain weekly leadership team meetings. Their schedule might shift to accommodate more customer-facing activities, such as defining and meeting with the most strategic customers.”
"It's that tactical," Katie emphasizes. This level of detail in redefining roles means there is less confusion throughout the company. By being proactive and specific about these changes, CEOs can set themselves and their new COO up for success.
And don’t consider this an optional step, Katie elaborates, "If this step is missed or not communicated clearly, it creates confusion throughout the company.”
Regarding the executive team, Katie warns, "You have to be very thoughtful about the implications for your executive team and your organizational structure at the executive level. For example, if you bring in a COO and half of the executive team is reporting to the COO and the other half is still reporting to the CEO, you might create a situation where they feel they have actually been demoted."
What to Look for in a Chief Operating Officer at a Startup
When hiring a COO, Katie recommends focusing on complementary skills and alignment with long-term goals. The COO role can vary significantly across companies, so it's important to base the hire on thorough self-reflection.
Harvard Business Review's article, "The Misunderstood Role of the COO," identifies seven types of COOs, offering valuable insights into the different capacities a COO can serve. For example, if you're looking for a successor in a relatively short period, you need someone you're confident can take over your job within that time frame. HBR refers to this type of COO as "the heir apparent." Alternatively, if you're seeking a partner to split responsibilities, you want to find someone who can bring different skills to the table.
Key considerations:
- Clarify succession plans: If you're looking for a successor, find someone who can step into the role of CEO in a short amount of time. The key is to understand their motivations, and have a clear understanding of this from the start.
- Align values, complement strengths: Look for someone with aligned values but complementary strengths. Hiring another version of yourself is likely not going to work.
- Build a strong relationship: Seek someone with whom you can build an open, trusting, transparent, and ego-free relationship. This foundation is crucial as the relationship evolves over time.
Experience is another critical factor. Katie emphasizes thinking about the stage you're trying to reach and finding someone who has led through that phase.
"Whatever point of the journey you're getting ready to go on, it's important to find stage-relevant experience. If you're a $20 million company aiming for $100 million, find someone who has been through that stage and enjoys it. If you're aiming to grow from $100 million to $500 million, find someone who thrives in that part of the journey, as they are very different experiences," Katie elaborates.
You don't have to go it alone. Get advice from those who have been through it before.
Katie's advice: Don't try to do it alone. "Have a mentor and independent board member to think through this. Talk to other founders or CEOs who have been through this same transition and ask them about their lessons learned. As the CEO, your ultimate job is to think about what's right for the business. You'll have to make decisions about what's right for the team and the business, versus what might feel right for you."